9 posts in this topic

NOTE: You may view the PDF version of this article on my website HERE. The PDF version is easier to read and includes better text formatting, and can be easily printed.

Introduction

Communication is an important key to success in collecting coins, but sadly, the value of clear and accurate communication is often overlooked. Correct use of numismatic terms in an unambiguous manner, and the ability to recognize when a specific term is being used improperly (or even with the intent to deceive) can mean the difference between a pleasant and meaningful numismatic experience, and a costly mistake. It is the responsibility of every numismatist to understand the vocabulary peculiar to his hobby, and to use terms properly.

For reasons that are difficult to pinpoint, the terms “sight-unseen” and “sight-seen”, though rather simple concepts, are misunderstood and misused more often by collectors than most other numismatic terms, and even novice dealers sometimes seem unaware of the proper usage of each phrase. In some unfortunate situations, deceitful sellers intentionally misuse these terms to trick unwary coin buyers.

The intent of this article is to describe the correct interpretation of the terms “sight-unseen” and the associated “sight-seen”.

Definition of “sight-unseen”

In the simplest of terms, to purchase a coin “sight-unseen” means to financially and irrevocably commit to its purchase based solely on the seller’s description, without ever actually seeing the coin. The irrevocable financial commitment means that the seller is not obligated to honor any type of refund on the coin should the purchaser wish to return it. The sale is final.

Definition of “sight-seen”

In a “sight-seen” transaction, the purchaser is permitted to physically examine the coin prior to financially committing to it. The examination must be of the actual coin being offered for sale, and must allow for viewing under ideal circumstances according to the purchaser’s preferences. “Sight-seen” includes those situations where the seller offers a legitimate return policy that allows return within a reasonable amount of time for a refund. In other words, even if funds actually exchange hands, the purchaser is nonetheless given opportunity for a refund should he decide to return the coin. The financial obligation is revocable (within the time limit).

In a special case, a coin collector may have a trusted dealer or friend purchase a coin on his behalf. In this case, it is incumbent on the collector to have implicit trust in his representative, because this type of transaction still qualifies as a “sight-seen” transaction.

A photograph or digital image of a coin is in no way a substitute for physical examination of the coin. Purchasing a coin based purely on an image of it is never considered “sight-seen”.

Role of the “return policy”

As noted, the presence of a legitimate return policy qualifies a transaction as “sight-seen”, even if payment is sent prior to receipt of the coin. It means that the purchaser may return the coin and get his money back if he deems the coin unsatisfactory. Thus, there is no irrevocable financial commitment to the transaction.

It is assumed, however, that the return policy is legitimate. If the requirements of the return policy are unreasonable, then the return policy may in fact be a farce, and the resulting lack of a legitimate return policy would indeed make the transaction a “sight-unseen” transaction.

Beware of tricks where the time allotted for the return policy is so short as to be impossible to meet. Also, beware of those situations where you can only return a coin for credit, and not for cash back. These are tricky situations where the seller is really trying to enforce a “sight-unseen” transaction, while making it appear otherwise.

Also, be careful of a situation where you are required to examine a coin under circumstances that are not ideal. For example, most any seller would require a coin to remain in the original protective holder – an understandable safety precaution that prevents unintentional damage, or dishonest replacement of the coin with one of lesser quality. However, the quality of the holder must be such that physical examination of the coin is facilitated. If the holder is scuffed, opaque, obscures part of the coin, or otherwise inhibits thorough examination of the coin, then the purchaser must be very cautious committing to the transaction.

Finally, be wary of those sellers who require a “restocking fee”, or other such deduction from the full refund price. A minimal fee to cover the costs of mailing the coin back and forth is understandable, but excessive percentages expressed as a “restocking fee”, or some similar penalty, confuse the issue, and really result in a “sight-unseen” transaction. Do not be misled. You should expect a full refund, minus a reasonable return shipping charge if applicable.

It is absolutely essential that the purchaser understand the seller’s return policy thoroughly. If you are unclear about the terms of a seller’s return policy, then either get clarification in writing, or avoid the transaction altogether. It is entirely the purchaser’s responsiblity to understand the terms of return.

How the concepts of “sight-unseen” and “sight-seen” are misunderstood

There are two scenarios in which many coin collectors most frequently misuse or misunderstand the application of these terms.

Often, in the first scenario, a collector incorrectly describes a transaction as “sight-unseen”, when in fact he was able to return a coin after purchase. Remember that if the purchaser is not irrevocably committed to a transaction, then it is “sight-seen”. In this example, the purchaser is able to return the coin for a refund, and thus it is not a sight-unseen purchase because there was no irrevocable financial commitment. He has an opportunity to examine the coin, and can back out should he decide to pass on it. By far, most transactions that take place are sight-seen.

The second scenario involves the use of images to describe a coin, and the seller commits to the purchase without the benefit of seeing the actual coin. Remember that an image of a coin, no matter how high the technical quality may be, is not a substitute for seeing the coin itself, and therefore, if you are irrevocably committed to the purchase after viewing the image, then it is a sight-unseen transaction. This situation often occurs with on-line auction sites, such as eBay, where a seller provides images of a coin, but does not offer a return policy.

An image amounts to nothing more than a method of describing a coin without physically showing the actual coin. Remember that no sale premised entirely on a description, and without a return policy, can be considered a sight-seen sale.

Here are examples of sight-seen purchases:

You go to a coin show, examine a coin under proper lighting and using your favored loupe, and decide to purchase it.

You pay for a coin out of a coin magazine advertisement, receive the coin several days later, and have a 10 day return policy.

You buy a coin from an eBay seller, and the seller offers a 5 day return policy.

A coin dealer you trust represents your interests at a major auction, and purchases a coin on your behalf.

Here are examples of sight-unseen purchases:

You buy a coin from an eBay seller who provides excellent images, but no return policy.

You go to a coin show and buy a bag of $10 face of junk silver sold strictly by weight.

You purchase a coin from a wholesaler who provides a return policy, subject to a 20% restocking fee.

Risks and benefits of purchasing coin sight-seen

In general, given a reasonable level of competence on the part of the buyer, there is much benefit to buying coins “sight-seen”. The purchaser has the opportunity to examine the coin under ideal circumstances, and is not financially obligated to the transaction until he is certain the coin meets his standards. He can compare the potential purchase to other coins in his collection to make sure it will fit in. In a situation where the purchaser doesn’t feel knowledgeable enough to appraise the coin, he has time to seek out other opinions.

The drawback to purchasing sight-seen is that the cost for a given coin will often be higher. This is because the seller (usually a dealer) must account for those instances when a coin is returned, as there is a cost associated with returned coins, including shipping and time involved in dealing with the situation. Dealers must maintain some cash reserve to cover potential returns – cash that cannot be used for other purchases.

Most collectors believe that the extra cost associated with a sight-seen purchase outweighs the peace of mind that comes with the privilege of being able to return a coin if necessary.

Risks and benefits of purchasing sight-unseen

The greatest benefit of purchasing “sight-unseen” is the lowered cost that is associated with these transactions. The seller knows for a fact that once the purchaser has committed funds to the sale, the sale is final, and the funds can be immediately turned to other use. He has no need to maintain a cash reserve to cover a potential return. The majority of “sight-unseen” purchases are at the wholesale level due to this lowering of the overhead costs for the transaction, and the speed with which the transaction is completed.

Another benefit to purchasing coins sight-unseen occurs when the purchase is for coins in bulk (ie. bullion). If you purchase a bag of 5000 silver dimes for their silver content, it is certain you will want to make this purchase sight-unseen, as you will likely not want to examine every single dime, which would be required to make this a “sight-seen” transaction.

The most obvious risk associated with a “sight-unseen” purchase is that the coin purchased will not measure up to the buyer’s expectations. The purchaser is relying on the seller’s integrity in grading and describing the coin accurately and fairly. Because the sale is final, whether or not the coin meets the buyer’s expectations, the seller has no obligation to refund the price of the coin, or otherwise compensate the buyer.

It is also possible that the seller of a coin truly made his best effort to grade and describe a coin properly, only to have the purchaser discover an undisclosed problem that was not known to the seller. For example, the coin could be cleaned or artificially retoned, had a hole expertly plugged, or have an easily-missed scratch or surface problem. In any case, the purchaser will be required to keep the coin in an “sight-unseen” transaction regardless of subsequent circumstances.

The role of certification

The advent of certified coins in 1986 was supposed to completely remove the risk of a coin not meeting a purchaser’s expectations with regard to grade or appearance. In theory, certified coins always bear the correct grade, and furthermore, coins with substantial problems would not be certified at all. Thus, the issue of whether a coin offered by a seller was graded correctly and problem-free was supposed to be eliminated, and coins could be able to be exchanged freely on a “sight-unseen” basis. Thus, the cost benefits of wholesale trading would be realized, resulting in a highly liquid market. In essence, rare coins would become “commodities”, and be able to trade as such. this, at least, was the theory behind certification of coins.

Unfortunately, the theory has not proven to hold true over time. Coin grading companies have found that it is impossible to completely remove the subjective bias that necessarily must enter into the grading of all coins. It is reasonable to estimate that today, 15% of the certified coins on the market are improperly graded, and it is in keeping with human nature that those improperly graded coins are the ones most likely to be found in a sight-unseen market. Indeed, anecdotes abound regarding the poor quality of certified coins that trade in wholesale markets.

It has also been estimated that 10% of certified coins have problems that should have prevented certification. The problem most often cited refer to coins that have been cleaned, dipped and artificially toned, but occasionally, other problems get through the various service’s quality control. There is the additional problem of mislabeled slabs and so-called “mechanical errors” that contribute more confusion to the sight-unseen market.

In point of fact, because the coin market tends to filter the lowest-quality coins (for the assigned grade) to sight-unseen trading, certified coins have actually contributed significantly to the risk associated with purchasing coins sight-unseen. Happily (and ironically), the faith many collectors have in certified coins has also facilitated a much higher level of “sight-seen” trading in recent years, resulting in a long-running bull market for sight-seen purchases. This is why the sight-seen market has exploded in recent years, while the wholesale market has been depleted, resulting in dealer complaints that “coins are not available”.

With plenty of history and experience now in place since the advent of certification, it has become clear that certification has not turned the coin market into a commodities market, though some strides have been made in that direction. But there are just too many stories about collectors who have been disappointed with their sight-unseen purchases to believe that certified coins will become a commodity anytime soon. If you intend to invest in coins for financial purposes, it behooves you to be aware that not all certified coins are graded equally, and the admonishment by experienced collectors to “buy the coin, not the holder” has never been more true than it is now.

Conclusion:

Generally, it is strongly recommended that collectors participate strictly in “sight-seen” purchases of coins for their collections. Considering the relatively small retail margin for coins in today’s market, the small savings in buying coins sight-unseen probably does not compensate for the risk of being “stuck” with a troubled coin from a sight-unseen transaction.

However, in the case of very generic coins, particularly bullion, where the actual appearance of the coins is of little consequence to its value, then a sight-unseen purchase may well save the buyer significant money.

Notes:

(1) It is customary to guarantee authenticity of a coin in either a “sight-seen” or “sight-unseen” transaction. This is because if the coin turns out to be counterfeit, then what was sold was not actually a coin, but an imitation of one. Thus, the transaction must be considered null and void.

(2) It is customary to guarantee correct attribution of a coin, where attribution is key to the value of the coin.

(3) In a sight-unseen transaction involving a certified coin where the coin did not meet the purchaser’s expectations as to grade or appearance, the purchaser has the option to take up the issue with the certifying company, and might be financially compensated. Despite this available avenue of financial recourse, such a transaction is still considered sight-unseen.

(4) Whether a coin is certified or not has absolutely no impact on the definition of whether a transaction is “sight-seen” or “sight-unseen”. Current grading standards used to certify coins are simply not stable and consistent enough for grading considerations to be removed from the process of buying coins.

Share this post

Link to post

Share on other sites

Xpipe, I do agree with your point: I cannot cite a reliable source for this claim. Indeed, I was somewhat wary of including such a bold statement in this discussion. I do not have any statistical research data to back this up, BUT I can state that this guesstimate is based on my dealings as a coin buyer and a coin seller - "from both sides of the fence".

I do feel that the premise is true - that less than 100% of certified coins are graded properly, and that less than 100% are problem free - and it is a crucial point to understanding the risks of buying sight-unseen. I sincerely hope that anyone who reads this discussion will understand.

I do believe that nobody would deny that there are improperly graded coins, and coins with problems, encapsulated by all of the certification services. The fact that such coins are always on the market is what leads to the risks.

Share this post

Link to post

Share on other sites

Great Post James. Just to reiterate what was already said. Its better for collectors to stick to the sight seen market, even it requires paying a little extra. The sight un-seen market is not what it used to be and is filled with pitfalls. It most cases, its a dumping ground for problem and over-graded coins. Maybe in 1986 certified coins were fungible commodities, that is certainly not the case today.